Manufacturing, Construction Expand in April

Reports this morning from the Institute for Supply Management (ISM) found that U.S. Manufacturing expanded for the 10th-consecutive month in April.  The ISM’s manufacturing index decreased slightly to 59.7 in April, from 60.4 in March.  This reading was slightly ahead of economists’ expectations.  Any number over 50 indicates that the manufacturing sector is growing.

To this point manufacturing has been driving the recovery, but there have not been corresponding gains in employment.  The standard measure of unemployment, U-3, is running at 9.9 percent.  The U-6 measure of unemployment, which includes marginally attached workers and involuntary part time workers, is north of 17 percent.  The all-important non-farm payroll report comes out Friday, and economists are predicting that 503,000 jobs were added in April.  Sustained gains in employment are the key to the economic recovery.

In contrast to the United States, manufacturing in China slowed to 53.9 in April from 55.7 in March.  Although this number still comes in above the expansion threshold of 50, it shows that the Chinese economy, which is hugely important to global growth, may be slowing in the second half of 2010.  China is a major purchaser of worldwide governmental debt, and any slowdown there could negatively effect the rest of the world.

U.S. construction also increased in April, gaining 2.7 percent over the March numbers, which is the largest one-month gain since August 2000. Curiously, housing construction increased by 4.4 percent in April.  Some of this may be related to the expiring tax credits and the extremely low baseline level of growth, but with the huge amount of surplus housing supply the uptick in residential construction is somewhat surprising.

Lastly, news out of Europe continues to be bad, as the Euro hit a four-year low against the dollar and European unemployment rose to 10.1 percent, the highest level since the beginning of the Euro.  Debt issues continue to plague Europe and there are serious doubts about the future of the Euro and the Eurozone.  Spain saw its credit rating slashed last Friday on concerns that austerity measures alone will not allow Spain to get its debt under control.

What do you think about the most recent economic reports?  Let us know in the comments section below.